Guidance Regarding Deduction and Capitalization of Expenditures Related to Tangible Property: Correction, 18687-18688 [2012-7263]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 77, Number 60 (Wednesday, March 28, 2012)]
[Rules and Regulations]
[Pages 18687-18688]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-7263]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9564]
RIN 1545-BJ93


Guidance Regarding Deduction and Capitalization of Expenditures 
Related to Tangible Property: Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary regulations; correcting amendment.

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SUMMARY: This document contains correcting amendments to temporary 
regulations (TD 9564), which were published in the Federal Register 
relating to guidance regarding deduction and capitalization of 
expenditures related to tangible property.

DATES: Effective Date: March 28, 2012.

FOR FURTHER INFORMATION CONTACT: Merrill D. Feldstein (202) 622-4950 
(not a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    The temporary regulations that are the subject of these corrections 
are under sections 162, 167, 168, and 263 of the Internal Revenue Code.

Need for Correction

    As published on December 27, 2011 (76 FR 81060), the temporary 
regulations (TD 9564), contain errors which may prove to be misleading 
and are in need of clarification.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

    Accordingly, 26 CFR Part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *


0
Par. 2. Section 1.162-3 is revised to read as follows:


Sec.  1.162-3  Materials and Supplies

    (a) through (k) [Reserved]. For further guidance, see Sec.  1.163-
3T(a) through (k).


0
Par. 2. Section 1.162-3T is amended by:
0
1. Revising the third sentence of paragraph (d)(3).
0
2. Redesignating paragraphs (i) and (j) as (j) and (k), respectively.
0
3. Redesignating the second paragraph (h), ``Accounting method 
changes'' as paragraph (i).
0
4. In newly redesignated paragraph (j) the second sentence is revised.
    The revisions read as follows:


Sec.  1.162-3T  Materials and supplies (temporary).

* * * * *
    (d) * * *
    (3) * * * See Sec.  1.263(a)-2T for the treatment of amounts paid 
to acquire or produce real or personal tangible property. * * *
* * * * *
    (j) * * * However, a taxpayer may apply Sec.  1.162-3T(e) (the 
optional method of accounting for rotable and temporary spare parts) to 
taxable years beginning on or after January 1, 2012. * * *
* * * * *

0
Par. 3. Section 1.168(i)-1T is amended by:
0
1. In paragraph (e)(3)(ii)(B), redesignating Example 2(iii) as Example 
2(ii).
0
2. Adding a new sentence at the end of paragraph (m)(2).
    The addition reads as follows:


Sec.  1.168(i)-1T  General asset accounts (temporary).

* * * * *
    (m) * * *
    (2) * * * This paragraph (m)(2) does not apply to a change to 
comply with paragraph (e)(3)(ii), (e)(3)(iii) or paragraph (l) of this 
section.
* * * * *

0
Par. 4. Section 1.168(i)-8T is amended by:
0
1. Redesignating the second paragraph (c)(4)(ii)(E) as paragraph 
(c)(4)(ii)(F).
0
2. Revising the first sentence of paragraph (g)(3).
    The revision reads as follows:


Sec.  1.168(i)-8T  Dispositions of MACRS property (temporary).

* * * * *
    (g) * * *
    (3) * * * This paragraph (g)(3) applies only to a taxpayer that 
uses a reasonable, consistent method to treat each of the asset's 
components as the asset in accordance with paragraph (c)(4)(ii)(F) of 
this section. * * *
* * * * *

0
Par. 5. Section 1.263(a)-2T is amended by:
0
1. Revising the eighth sentence of paragraph (g)(8) Example 2.
0
2. Revising the last sentence of paragraph (k).
    The revisions read as follows:


Sec.  1.263(a)-2T  Amounts paid to improve tangible property 
(temporary).

* * * * *
    (g) * * *
* * * * *
    (8) Examples. * * *
* * * * *
    Example 2. * * * Thus, in order to meet the criteria of 
paragraph (g)(1)(iv) of this section for Year 1, the total aggregate 
amounts paid and not capitalized by X under paragraphs (g)(1)(i), 
(ii), and (iii) of this section must be less than or equal to the 
greater of $125,000 (0.1 percent of X's total gross receipts of 
$125,000,000) or $140,000 (2 percent of X's total depreciation and 
amortization of $7,000,000). * * *
* * * * *
    (k) * * * For the applicability of regulations to taxable years 
beginning before January 1, 2012, see Sec.  1.263(a)-2 in effect prior 
to January 1, 2012 (Sec.  1.263(a)-2 as contained in 26 CFR part 1 
edition revised as of April 1, 2011).
* * * * *

[[Page 18688]]


0
Par. 6. Section 1.263(a)-3T is amended by:
0
1. Revising paragraph (b).
0
2. Revising the sixth sentence of paragraph (e)(6), Example 17.
0
3. Revising the seventh sentence of paragraph (i)(5), Example 20.
0
4. Revising the third sentence of paragraph (i)(5), Example 22 
paragraph (ii).
0
5. Revising the last sentence of paragraph (i)(5), Example 23.
0
6. Revising paragraph (q).
    The revisions read as follows:


Sec.  1.263(a)-3T  Amounts paid to improve tangible property 
(temporary).

* * * * *
    (b) * * * For purposes of this section, the following definitions 
apply:
* * * * *
    (e) * * *
    (6) Examples. * * *
* * * * *
    Example 17. * * * In year 7, X changed its method of accounting 
to use a 15-year recovery period for the improvement. * * *
* * * * *
    (i) * * *
    (5) * * *
* * * * *
    Example 20. * * * The plumbing fixtures in all the restrooms 
perform a discrete and critical function in the operation of the 
plumbing system and comprise a large portion of the physical 
structure of the plumbing system. * * *
* * * * *
    Example 22. (i) * * *
    (ii) * * * All the bathtubs, toilets, sinks, and plumbing 
fixtures in the hotel building perform a discrete and critical 
function in the operation of the plumbing system and comprise a 
large portion of the physical structure of the plumbing system. * * 
*
    Example 23.  * * * Accordingly, X is not required to treat the 
amount paid to replace the windows as a restoration of a building 
system under paragraph (i)(1)(iv) of this section.
* * * * *
    (q) * * * The applicability of this section expires on December 23, 
2014.


0
Par. 7. Section 1.263(a)-6T is amended by revising paragraphs (b)(13) 
and (d) to read as follows:


Sec.  1.263(a)-6T  Election to deduct or capitalize certain 
expenditures (temporary).

* * * * *
    (b) * * *
    (13) Section 193 (tertiary injectants);
* * * * *
    (d) Expiration date. The applicability of this section expires on 
December 23, 2014.


0
Par. 8. Section 1.1016-3T is amended by revising the second sentence of 
paragraph (j)(3) to read as follows:


Sec.  1.1016-3T  Exhaustion, wear and tear, obsolescence, amortization, 
and depletion for periods since February 13, 1913 (temporary).

* * * * *
    (j) * * *
    (3) * * * For the applicability of Sec.  1.1016-3(a)(1)(ii) to 
taxable years beginning before January 1, 2012, see Sec.  1.1016-
3(a)(1)(ii) in effect prior to January 1, 2012 (Sec.  1.1016-
3(a)(1)(ii) as contained in 26 CFR part 1 edition revised as of April 
1, 2011).
* * * * *

 Guy R. Traynor,
Federal Register Liaison, Legal Processing Division, Publications & 
Regulations Br., Associate Chief Counsel, (Procedure & Administration).
[FR Doc. 2012-7263 Filed 3-27-12; 8:45 am]
BILLING CODE 4830-01-P